Investment Banking: Public and Private Placement

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    Investment Banking: Public and Private Placement - Presentation Transcript

    1. Investment Banking: Public and Private Placement
    2. You can download this presentation at: www.cleverpresentations.com Please visit www.cleverpresentations.com for more presentations on marketing, strategy and case solution
    3. FIGURE 1-1 Distribution process in investment banking
    4. FIGURE 1-2 Allocation of underwriting spread
    5. FIGURE 1-4 Internet Capital Group common stock price (as of May 6, 2003)
    6. Slides Outline What is Investment Banking?  Functions of the Investment Banker  Underwriting Spread  Public vs. Private Companies  Advantages and Disadvantages of a Public Company  Initial Public Offering and Leveraged Buyout 
    7. What is Investment Banking? Investment Banking deals with primary offerings of new  securities The Investment Banker serves as the intermediary or  link between the corporation and the investor Brings the two parties together by channeling money  from one to the other
    8. Functions of the Investment Banker Underwriter: –buying the security and reselling it to the public – the risk-taking function Market Maker: – ensuring an available market by buying and selling the security Advisor: – providing advice on the issue Agency Functions: – negotiating the best possible deal for the corporation
    9. Underwriting Spread Spread represents the compensation for  those participating in the distribution Spread = Public Price - Issue Price It is shared by all the participants  Spread on common stocks is greater than  the spread on bonds
    10. Public vs. Private Companies Public company: – when shares of a company are offered to the public – anyone can buy shares of the stock Private company: – privately owned or held by an individual or family – not available to the general public
    11. Advantages and Disadvantages of a Public Company Advantages of being public: – greater availability of funds (easier to grow and raise money) – prestige Disadvantages of being public: – company information must be made available to the public (opening the company up to public scrutiny and criticism) – high costs of going public (expensive)
    12. Initial Public Offering and Leveraged Buyout Initial Public Offering (IPO): – when a company sells its stock to the public for the first time – the company becomes publicly traded Leveraged Buyout (LBO): – money is borrowed to repurchase all the shares of the company resulting in a great deal of debt – when a company “goes private”

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